Question

We have all heard the cliche' "cash is king." Cash flow is important to all businesses but why is cash flow so critically important for a startup?

200 words minimum please!

Answer 1

Cash flow is the basic entity upon which businesses depend. Usually, all the activities of the company revolve around the availability of cash. It is essentially important for startups to be especially careful with how they manage their budget because it is not a guarantee that they will be able to convert their profit streams to cash flows which is why they need to be much more careful because startups are developed on the basis of their evaluation. This is the factor that startups need to be concerned about. The basis for evaluation is earning potential and not the cash potential of the company which in easier terms mean that the company may have a well-developed plan for maintaining their cash flow ut since it is a theoretical value, actual values may contain some deviations which can result in companies not being able to develop enough cash to sustain their growth or daily processes.